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With the nation driving into New Financial Year 2021-22, corporates should be aware of the tax rate applicable to them. Since the applicability of the Finance Act 2020, along with Finance Act 2021, there has been some complexity attached to new reforms. The effort has been made to simplify such complex tax rates.

Corporate Tax rate for FY 2021-22

Following are details of the Special Tax rate

Particulars

Section 115BA

Section 115BAA

Section 115BAB

Normal tax rate

Rate of Tax (%)

25

22

15

30

Company Type

Domestic company

Domestic company

Domestic company

Domestic company

Date of Registration

1-Mar-2016

All registered and registering companies

1-Oct-19

All registered and registering companies

Business type

Manufacture/Production and research of article

All type of company

Manufacture/Production and research of article

 

Business of manufacturing or production of any article/thing shall include the business of generation of electricity, except following :-

(i) development of computer software in any form or in any media;

(ii) mining;

(iii) conversion of marble blocks or similar items into slabs;

(iv) bottling of gas into cylinder;

(v) printing of books or production of cinematograph film; or

(vi) any other business as may be notified by the Central Government in this behalf

All type of company

Depreciation

As per section 32 except provision of Sec. 32(1)(iia) (additional depreciation of 20%)

As per section 32 except provision of Sec. 32(1)(iia) (additional depreciation of 20%)

As per section 32 except provision of Sec. 32(1)(iia) (additional depreciation of 20%)

As per section 32

Special Ponits

-

-

(a) STCG on capital asset where no deprecation is taken is taxed at 20%

(b) Income which is not derived from manufacture or production of article/thing on which no specialized tax rate is applied, would be taxed at 22%

© Company must commence its manufacturing or production on or before 31-Mar-2023 and does not use any machinery or plant previously used for any purpose other than imported p&m.

(d) does not use any building previously used as a hotel or a convention centre, as the case may be, in respect of which deduction under section 80-ID has been claimed and allowed.

(e) where it appears AO in regards of close connection with any other person that any addition tax benefit has been taken which was not ought to be taken then such income from head of business and profession would be taxed at higher rate of 30%

-

MAT applicability

Applicable (cannot exceed 15%)

Not Applicable

Not Applicable

Applicable

Surcharge

10%

10%

10%

Total income 1-10 cr : 7% Total income above 10 cr : 12%

Health & Education cess

4%

4%

4%

4%

Set-off of carried forward loss

setoff of loss from business carried forward from earlier assessment years if loss related to sections mentioned below

setoff of loss from business carried forward from earlier assessment years if loss related to sections mentioned below

-

Allowed as normal provision

Loss or Unabsorbed depreciation

-

setoff of loss or unabsorbed depreciation if loss related to sections mentioned below

setoff of loss or unabsorbed depreciation if loss related to sections mentioned below

Allowed as normal provision

Deductions not allowed

Sec. 10AA (units of SEZ), Sec. 32(1)(iia) (additional depreciation of 20%), Sec. 32AC (investment in new plant & machinery),Sec. 32AD (investment in new plant & machinery-in notified backward area in certain states),Sec. 32AB (investment deposit account for deduction on account of tea growing business), Sec. 32ABA, Sec 35 (Expenditure on scientific research),Sec 35AC (Expenditure on eligible projects), Sec 35AD (Deduction in respect of Specified business), Sec 35CCC (Expenditure on agriculture extension project),Sec 35CCD (Expenditure on skill development project), provision of chapter VI-A except Sec. 80JJAA

Sec. 10AA (units of SEZ), Sec. 32(1)(iia) (additional depreciation of 20%), Sec. 32AD (investment in new plant & machinery-in notified backward area in certain states), Sec. 33AB (Tea development account, coffee development account and rubber development account),Sec. 33ABA (site restoration fund), Sec 35 (Expenditure on scientific research),Sec 35AD (Deduction in respect of Specified business),Sec 35CCC (Expenditure on agriculture extension project),Sec 35CCD (Expenditure on skill development project),provision of chapter VI-A except Sec. 80JJAA

Sec. 10AA (units of SEZ), Sec. 32(1)(iia) (additional depreciation of 20%),Sec. 32AD (investment in new plant & machinery-in notified backward area in certain states),Sec. 33AB (Tea development account, coffee development account and rubber development account),Sec. 33ABA (site restoration fund),Sec 35 (Expenditure on scientific research),Sec 35AD (Deduction in respect of Specified business),Sec 35CCC (Expenditure on agriculture extension project),Sec 35CCD (Expenditure on skill development project),provision of chapter VI-A except Sec. 80JJAA

Allowed as normal provision

Option

Option once exercised cannot be withdrawn in current & subsequent AY's, provided person can opt for Sec 115BAA

Option once exercised cannot be withdrawn in current & subsequent AY's, provided person became invalid for 115BAB can opt for Sec 115BAA

Option once exercised cannot be withdrawn in current & subsequent AY's, provided person became invalid for 115BAB can opt for Sec 115BAA

-

Corporate Tax rate for FY 2021-22

Benefit derived from above

  1. The Government is trying to simplify income tax structure which is much complex by bringing new tax rate in picture and removing other tax incentive sections.
  2. Major focus has been given to manufacturing entities which are liable to pay 15% tax under new reforms. On crux this rate of tax is way economical in terms of applicable tax rate to partnership firms (30%)
  3. Relaxation is also been awarded in terms of MAT
  4. Surcharge & Cess is also kept at flat rate irrespective of income.
 

Along with benefit there are some challenges also which kept companies to stick to old regime such as non-utilization of MAT credit available to entities. We hope that government will bring resolution to that in coming times.

 

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Category Corporate Law, Other Articles by - Manish Mehra 



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